Bitcoin began trading on Tuesday with further declines in its price, led by widespread declines in European stock indices. In this context of global risk aversion accentuated by the escalation in the conflict between Russia and Ukraine, cryptocurrencies are far from behaving as safe haven assets, which they try to emulate, and they move in a similar way to risk ones. to the contrary, traditional safe-haven assets like gold are gaining ground in these times of doubt for investors around the world.
Bitcoin traded near a more than two-week low as Fears of a possible Russian invasion of Ukraine led some analysts to predict that the largest cryptocurrency could slide towards the key $30,000 level..
The cryptocurrency was little changed after hit a low of $36,372 on Tuesday after Russian President Vladimir Putin said he is recognizing two self-proclaimed breakaway republics in eastern Ukraine and ordered troops there.
Not only Bitcoin fell. Ether, the token of the Ethereum protocol, lost up to 3% on the day before rebounding slightly and XRP collapsed 9% as a result of fear dominating investors.
The most traded cryptocurrency had dipped below the $40,000 level over the weekend and continued to weaken as the Ukraine crisis deepened, undermining the argument that cryptocurrencies are a haven in times of geopolitical turmoil. . At the same time, gold has reached its highest level since June.
“In the latest maelstrom of the world – the US/Russia/Ukraine – Bitcoin, the asset that is supposed to be the answer to all questions, has quietly weakened and is noticeably behind its arch-nemesis, gold,” he said. John Roque of 22V Research in a note quoted by Bloomberg,
Roque predicted that Bitcoin could drop below $30,000 – a level it hasn’t seen since July – as traders increasingly lean towards gold, which could push bullion to an all-time high.
“’Digital gold’ has plummeted…while gold has risen. (…) The narrative that digital gold is a better way to escape has not worked in Ukraine” (Zschaepitz)
“In a tense situation, investors will prioritize commodities like gold and crude oil over riskier stocks and cryptocurrencies,” he said. Griffin-Arderna volatility trader at crypto asset management firm Blofin cited by UK Yahoo Finance.
Antony Trenchev, co-founder and managing partner of Nexo also quoted by Yahoo Finance, echoed this point. He said: “Bitcoin’s inability to hold $40,000 amid rising Ukraine tensions means $30,000 is back in play.”
“Geopolitics has, for now, replaced inflation as the main driver of both traditional and crypto markets.”
To the contrary, gold prices climbed back above $1,900 an ounce on the day, while silver prices were also up more than 1%, with the Japanese yen also in demand.
“It seems that Bitcoin will not be a safe haven in geopolitical crises,” he said for his part. Holger Zschaepitz of Welt.
“Digital gold (a reference to Bitcoin) has plummeted…while gold has risen. The correlation between digital and analog gold is now even negative. The narrative that digital gold is a better way to escape has not worked in Ukraine.”
In addition to Ukraine-Russia tensions in recent weeks, bitcoin has also faced a struggle over Federal Reserve rate hike fears.